Recent insights from IT audit and advisory sources, including PwC and IT Audit Labs commentary, highlight a renewed focus on third party IT risk as organisations continue to expand their reliance on external providers.
In 2026, this is no longer limited to outsourcing arrangements, third-party dependencies now extend across:
- Cloud infrastructure providers
- SaaS platforms
- Data processors
- AI and analytics vendors
This growing ecosystem introduces complex risk dependencies that must be understood and governed effectively.
Why ThirdParty Risk Is Increasing
Several trends are driving increased scrutiny:
- Organisations are becoming more digitally interconnected
- Critical processes are often outsourced or platform-dependent
- Data is increasingly stored and processed externally
- Regulatory expectations around outsourcing are tightening
This means that control failures within a third party can directly impact financial reporting, operational resilience, and regulatory compliance.
The Role of SOC Reports and Assurance
Traditionally, organisations have relied on SOC 1 and SOC 2 reports to gain assurance over third-party controls.
However, recent commentary suggests that many organisations:
- Over-rely on SOC reports without sufficient challenge
- Fail to assess whether controls are relevant to their specific risks
- Do not adequately evaluate complementary user entity controls (CUECs)
From an audit perspective, this creates a risk that assurance is assumed rather than validated.
Implications for IT Audit and SOX
For SOX environments, third-party systems are often part of the financial reporting control landscape.
Auditors must determine:
- Whether reliance can be placed on vendor controls
- How third-party systems impact data completeness and accuracy
- Whether internal controls appropriately mitigate external risks
Weak vendor governance can lead to:
- Expanded audit testing
- Increased reliance on manual controls
- Potential control deficiencies
A Governance Challenge for Senior Stakeholders
The increasing reliance on third parties means that vendor risk is now a board-level issue.
Senior stakeholders should have visibility over:
- Key vendor dependencies
- Critical systems hosted externally
- Control assurance mechanisms (SOC reports, certifications)
- Risk exposure across the vendor landscape
This is particularly important in financial services, where regulators expect robust outsourcing and third-party oversight frameworks.
Practical Priorities
To strengthen third-party IT risk governance, organisations should focus on:
- Enhancing vendor risk assessment processes
- Validating SOC reports against actual control requirements
- Monitoring CUEC compliance internally
- Integrating vendor risk into IT audit planning
Importantly, third-party risk should not be treated as separate from ITGC, it is an extension of the control environment.
Closing Perspective
As organisations continue to rely on external providers, third-party IT risk will remain a central challenge for governance and audit functions.
For IT audit and risk leaders, the priority is ensuring that vendor controls are not just reviewed, but fully understood, validated, and integrated into the broader control framework.
Strong third-party governance is no longer optional, it is essential for maintaining trust, compliance, and operational resilience in a connected digital ecosystem.
